GAUTAM BUDDHA UNIVERSITY

School of Law, Justice & Governance

ASSIGNMENT
“Rights and Duties of Mortgager and Mortgagee”

LAW OF PROPERTY (LB401)

SUBMITTED BY: SUBMITTED TO:

SUNNY BHARDWAJ MR. GAURAV YADAV

20/ILB/103

BA.LLB- 4TH YEAR/SEMESTER 7TH (SECTION- B)

 Contents
ACKNOWLEDGEMENT ....................................................................................................................... 3
Introduction ...................................................................................................................................... 4
When do rights & liabilities of a mortgagor arise? ............................................................................. 4
Who is a mortgagor? ......................................................................................................................... 5
Who is a mortgagee? ..................................................................................................................... 5
Different kinds of mortgage ........................................................................................................... 5
Rights of Mortgagor....................................................................................................................... 6
Right to Redemption (section-60) .................................................................................................. 6
Obligation to transfer to the third party instead of transferring it to mortgagor (section-60A) .......... 7
Right to inspection and production of documents (section-60B) ................................................ 8
Right to Accession (section-63) .................................................................................................... 8
Right to Improvements (section-63A) ......................................................................................... 9
Right to Renewed Lease (section-64) ............................................................................................. 9
Right to grant a Lease (section-65A)............................................................................................. 10
Duties/liabilities of a mortgagor................................................................................................... 10
Duty to avoid waste (section-66) ................................................................................................ 11
Duty to indemnify for defective title ......................................................................................... 11
Duty to compensate mortgagee ................................................................................................. 11
Duty to direct rent of a lease to mortgagee ............................................................................... 12
RIGHTS OF MORTGAGEE .............................................................................................................. 12
LIABILITIES OF THE MORTGAGEE ................................................................................................. 14
Conclusion ................................................................................................................................... 16
REFERENCE: ................................................................................................................................. 17
 ACKNOWLEDGEMENT

I take this opportunity to express my profound gratitude and deep regards to my teacher
Mr. Gaurav Yadav Sir for his exemplary guidance, monitoring and constant
encouragement throughout the course of this assignment. The blessing, help and
guidance given by his time to time shall carry me a long way in the journey of life on
which I am about to embark.

I also take this opportunity to express a deep sense of gratitude to my friends for cordial
support, valuable information and guidance, which helped me in completing this task
through exhaustive research.

Date:
Place: SOLJ&G, GBU (Teacher Sign.)
 Introduction
Nowadays mortgage is a very commonly used word. Every single person has the
knowledge that if he wants a loan to be sanctioned, he has to pay some collateral and
for that, he has to mortgage his property with a bank. Mortgagor and mortgagee are the
parties who have an important role to play during mortgage of a property. Various
statutes available in India deals with a mortgage. Following legislation deal with
mortgage:

1. The Transfer of Property Act, 1882– Sections 58-104, which are mentioned in
1
Chapter IV deals with the significant part of mortgage.

2. The Civil Procedure Code, 1908– The procedural part of mortgage of immovable
property is dealt in Chapter XXXIV of CPC.

3. Indian Contract Act, 1872– Any contract related to mortgage and its general
principles are mentioned in the Indian Contract Act of 1872.

When do rights & liabilities of a mortgagor arise?

The rights and liabilities of a mortgagor arise during a mortgage. A loan may be
secured or unsecured. Where a loan is given simply on the basis of debtor’s
promise to pay (e.g. on promissory-note), such loans are called as unsecured
loans. But, where the creditor takes security from the debtor for the repayment of
his money, the loan is known as secured loans. One such way to secure loans is
mortgage. Section-58(a) of the Transfer of Property Act, 1882 has defined
mortgage as the transfer of an interest in a specific immovable property for
securing:

 The payment of money given to him or to be given through loan, or

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december 2023)
  An existing or future debt, or

 The performance of an engagement which may give rise to a pecuniary

liability.

Who is a mortgagor?
The person who has transferred the interest in a specific immovable property is
known as mortgagor. For instance, A wants a loan from B. Now B wants his
amount to be secured which he is going to loan A. A will transfer the interest in
a specific immovable property to B and will give him the authority of selling it in
case A is not able to repay B’s amount. Here A is the mortgagor.

Who is a mortgagee?
The transferee or person in whose favour the interest is being transferred is known
as mortgagee

Different kinds of mortgage

There are six kinds of mortgage which are recognized under the Transfer of
Property Act, 1882. They are discussed in the act from section 58(b)-
58(g). Following are the different kinds of mortgage:

1. Simple Mortgage section-58(b)

2. Mortgage by conditional sale section-58(c)

3. Usufructuary Mortgage section-58(d)

4. English Mortgage section-58(e)

5. Mortgage by deposit of title deeds section-58(f)

6. Anomalous Mortgage section-58(g)

 Rights of Mortgagor
Every mortgage-deed leaves a right to the mortgagor and a corresponding liability
for mortgagee and vice versa. Following are the rights given to a mortgagor given
by the Transfer of Property Act, 1882:

1. Right to redemption

2. Right to transfer mortgaged property to a third party instead of

retransferring

3. Right of inspection and production of documents

4. Right to accession

5. Right to improvements

6. Right to a renewed lease

7. Right to grant a lease

Right to Redemption (section-60)

It is one of the most important rights of a mortgagor given under section of the
Act. This right puts an end to mortgage by returning the property of
mortgagor. The right to redeem further grants three rights to the mortgagor:

1. Right to end mortgage deal

2. Right to transfer mortgaged property to his name

 3. To take back possession of property in case of delivery of possession
In the case of Noakes & Co. vs. Rice (1902) AC 24, Rice was a dealer who
mortgaged his property, premise and goodwill to N subject to the provision that
if R paid back the whole amount, the property would be transferred back to his
name or any other person’s. A covenant was attached that stated whether or not
the amount is due, R would only sell Malt liquor by N in his premises. Because
of this covenant, R had difficulty in redemption and it didn’t give him absolute
right over his property. House of Lords held that anything which clogs this right
is bad and they came up with the concept that ‘once a mortgage always a
mortgage’ and said that mortgage could never be irreducible.

This principle was added to protect the interest of a mortgagor. Any condition or
provision which prevents a mortgagor from redeeming his mortgaged property is
a clog on the right of redemption. The right to redemption continues even though
the mortgagor fails to repay the loan amount to mortgagee. In the case of Stanley
v. Wilde, (1899) 2 Ch 474, it was held that any provision mentioned in the
mortgage-deed which has an effect of preventing or impeding the right to
redemption is void as a clog on redemption.

 Exceptions to the right- The right to redeem has three exceptions. It

can be extinguished under the following cases:

 By the act of parties

 By operation of law

 By decree passed by the court

Obligation to transfer to the third party instead of transferring it to mortgagor

(section-60A)
This right was added in the Act by Amendment Act of 1929. This right provides
the mortgagor with authority to ask the mortgagee to assign the mortgage debt
and transfer the property to a third person directed by him. The purpose of this
right is to help the mortgagor to pay off the mortgagee by taking a loan from a
third person on the same security.

Right to inspection and production of documents (section-

60B)

This section is also inserted by the Amendment Act of 1929. It is the right of
mortgagor to ask mortgagee for the production of copies of documents of the
mortgaged property in his possession for inspection on notice of reasonable time.
The expenses incurred on production or copies of documents or travel expenses
of a mortgagee are to be paid by the mortgagor. This right is available to the
mortgagor only as long as his right to redeem exists.

Right to Accession (section-63)

Basically, accession means any addition to property. According to this right

mortgagor is entitled to such accession to his property which is in the custody of
mortgagee. There are two types of accession:

 Artificial accession- It is when mortgagor made some efforts and it

increased the value of land.

 Natural accession- The name itself defines i.e. without any man-made
efforts.2

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In case an accession is made to the property due to the efforts of mortgagee or at
his expense and such accession is inseparable, mortgagor, in order to be entitled
to such succession, needs to pay the mortgagee the expense of acquiring such
accession.

If such separate possession or enjoyment is not possible, the accession must be

delivered with the property; it is the liability of mortgagor, in the case of an
acquisition which is necessary to preserve the property from destruction,
forfeiture or sale, or made with his assent, to pay the proper cost thereof, as an
addition to the principal money, with interest at the same rate as is payable on the
principal amount, or, where no such rate is fixed, at the rate of nine percent per
annum.

Right to Improvements (section-63A)

According to this right if the mortgaged property has been improved while it was
in possession of mortgagee, then on redemption and in the absence of any contract
to the contrary mortgagor is entitled to such improvement. The mortgagor is not
liable to pay mortgagee unless:

 Improvements made by the mortgagee were to protect the property or

with the prior permission of mortgagor.

 Improvements were made by the mortgagee with the permission of the

public authority.

Right to Renewed Lease (section-64)

If the mortgagor is entitled the mortgaged property is a leasehold property and
during the duration of mortgage the lease gets renewed then, on redemption the
mortgagor is entitled to have the benefit of the new lease. This right is available
to the mortgagor unless he enters into any contract to the contrary with mortgagee.

Right to grant a Lease (section-65A)

This right was introduced by the Amendment Act of 1929. Prior to this right, the
Transfer of Property Act did not allow a mortgagor to lease out the mortgaged
property on his own but only with the permission of mortgagee. Now, a
mortgagor has the right to lease out the mortgaged property while he is in lawful
possession of that property, subject to the following conditions:

 All conditions in the lease should be according to the local laws and
customs to prevent any fraudulent transaction.

 No rent or premium shall be paid in advance or promised by

mortgagee.

 The contract shall not contain any provision for the renewal of the
lease.

 Every such lease shall come into effect within a period of six months
from the date of its execution.

 Where the mortgaged property is a building, the term of the lease

should not exceed three years in total.

Duties/liabilities of a mortgagor
Along with the rights given to a mortgagor, the Transfer of Property Act has also
conferred some duties on him. Following are the duties of a mortgagor:

1. Duty to avoid waste

2. Duty to indemnify for defective title

 3. Duty to compensate mortgagee

4. Duty to direct rent of a lease to mortgagee

Duty to avoid waste (section-66)

This section imposes a duty on the mortgagor to not to commit any act which
leads to the waste of property or any act which reduces the value of the mortgaged
property. Waste is divided into two categories:

 Permissive waste– A mortgagor who is in possession of the mortgaged

property is not liable to the mortgagee for any minor waste.

 Active waste– When an act is done which causes major waste of the
property or leads to the reduction in the value of mortgaged property,
then the mortgagor will be liable to the mortgagee.

Duty to indemnify for defective title

It is the duty of a mortgagor to compensate the mortgagee for a defective title in

the mortgaged property. A defective title refers to a situation when a third party
starts claiming or interferes with mortgaged property. It is a liability for the
mortgagor to compensate for the expenses incurred by mortgagee for protecting
the title of that property.

Duty to compensate mortgagee

If the mortgaged property is in possession of mortgagee who is paying all the

taxes and other public charges, then i3t is the duty of mortgagor to compensate

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mortgagee for incurring such expenses. Similarly, when there is no delivery of
possession i.e. the mortgaged property is still in possession of mortgagor, then it
is his duty to pay all public charges and taxes levied on it.

Duty to direct rent of a lease to mortgagee

Where the mortgaged property is leased by mortgagor then it is his duty to

direct lessee to pay the rent, etc. to the mortgagee.

RIGHTS OF MORTGAGEE
Right to foreclosure or sale [Section 67]

According to this section, after the mortgage money has become due, the
mortgagee has a right to debarred the mortgagor of his right to redeem the
property. This right can be exercised at any time after the mortgage-money has
become due to him, and before a decree has been made for the redemption of the
mortgaged property, or the mortgage-money has been paid or deposited.

Right to sue for mortgage-money [Section 68]

According to this section, the mortgagee has a right to sue for the mortgage
money under the following conditions –

1. Where the mortgagor binds himself to repay the same.

2. Where the mortgaged property is completely or partially destroyed
without any fault of them mortgagee.
 3. where the mortgagee is deprived of the whole or part of his security by
or in consequence of the wrongful act or default of the mortgagor.
4. In specific mortgage, where the mortgagee is entitled to possession of the
security but the mortgagor fails to do so.

Right to sell [Section 69]

According to this section, the mortgagee has a right to sell the mortgaged
property without the intervention of the court. However, this right can
only be exercised under the following conditions –

1. Where the mortgage is an English Mortgage and the mortgagor and

mortgagee are not Hindus, Muhammadan, Buddhist or a member of any
race, sect, tribe or as stated by the official gazette of the State
government.
2. Where this power of mortgagee is explicitly stated by the mortgagee in
the mortgage deed and the mortgagee is itself government and the
property are located in specified towns i.e., Calcutta, Madras or Bombay
originally.

Right to accession [Section 70]

According to this section, if any accession is made to the mortgaged property

after the date of execution of the mortgaged deed, then the mortgagee has a right
over those accession.

Renewal of mortgaged lease [Section 71]

According to this section, when the mortgaged property is as lease, and the
mortgagor obtains a renewal of 4the lease, the mortgagee, in the absence of a
contract to the contrary, shall, for the purposes of the security, be entitled to the
new lease.

Rights of mortgagee in possession [Section 72]

According to this Section, the mortgagee in possession has a right to spend

money for the preservation of the mortgaged property from destruction, forfeiture
or sale; for supporting the mortgagor’s title to the property; for making his own
title thereto good against the mortgagor; and when the mortgaged property is a
renewable lease-hold, for the renewal of the lease.

LIABILITIES OF THE MORTGAGEE

Mortgagee when bound to bring one suit on several mortgages [Section 67A]

According to this section, when a mortgagee has two or more mortgage of same
or different kind against the same mortgagor, then he has a right to get a decree
of the court under section 67 against the same mortgagor and in case the
mortgagee wishes to sue the mortgagor on anyone of the mortgages, then he
shall have to sue all the mortgages where the mortgage money is due on part of
the mortgagee.

Liabilities of mortgagee in possession [Section 76]

When, during the continuance of the mortgage, the mortgagee takes possession
of the mortgaged property, then he has the duty to –

1. Manage the property well in manner of ordinary prudence.

2. Collect rents and profits of the property to his best endeavor.
3. Pay the government dues duly while the property is in his possession.
4. Make the necessary repairs of the property unless it is contrary to the
contract.

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 5. Not commit any act which may damage or deteriorate the value of the
property permanently.
6. Apply for insurance money for reinstating the property or in case he
receives reduction in mortgage money from the mortgaged property.
7. Keep proper accounts of all the sums received and spent by him over
the mortgaged property.
8. Apply for rents and profits for discharging the interests of principal
amount and make certain deductions.

LANDMARK JUDGEMENT
Right of Redemption (Section 60)

 Noakes & Co. Vs Rice, (1902) AC 24

In this case, the House of Lords observed that anything which obstructs or
comes in the way of right to redemption of mortgagor is bad and came with the
phrase “once a mortgage always a mortgage” and clarified that mortgage is not
reducible.

 Stanley Vs Wilde, (1899) 2 Ch 474

It was decided that even under condition where the mortgagor fails to pay his
debts or the loaned amount, wouldn’t take away the right to redemption of the
mortgagor, and if there is any such provision clogging the right to redeem, then
it will be considered void.
Right of foreclosure or sale (Section 67)

 K. Vilasini Vs Edwin Periera, AIR 2009 SC 104

It was noted that an order of foreclosure is passed only after determining the
kind and nature of mortgage and the parties who are operating within the
mortgage.
 Conclusion
The transfer of property in India is governed by the Transfer of Property Act,
1882. It came into force on July 1st, 1882. The Act addresses the concept of
“mortgage,” which is defined in Section 58(a). Whenever a mortgage deed is
entered into, two major parties are created, i.e., the mortgagor and the mortgagee.

A finalized mortgage deed gives rise to certain rights and liabilities of the parties
that are defined under the Act. There are certain rights and liabilities that have
existed since the enactment of this Act, while others have been inserted through
the Transfer of Property Amendment Act of 1929.
 REFERENCE:
https://blog.ipleaders.in/rights-liabilities-mortgagor-india/
https://www.lawinsider.in/columns/the-rights-liabilities-of-
mortgagor-and-mortgagee
A mortgage-deed comes up with many rights and liabilities for both the parties
involved i..e. mortgagor and mortgagee. These rights and liabilities were created
and included in the Transfer of Property Act in 1882 which is quite old and
therefore is outdated. Though amendments were made in the Amendment Act of
1929, but no recent amendments have been made in the chapter of rights and
liabilities of mortgagor. This has lead to various fraudulent transactions as both
the mortgagor and mortgagee has found various new methods of deceiving each
other. Therefore, the need of the hour is to amend the laws and make it more
stringent so that no party attempts to enter in fraudulent transactions.